TaxTMI 
TaxTMI 
2018 (7) TMI 946
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.... the Act. For the assessment year under dispute, the assessee filed its return of income on 17th November 2011, declaring total income of Rs. 1,98,14,801 under the normal provision and book profit of Rs. 2,16,34,283 under section 115JB of the Act. During the assessment proceedings, while verifying assessee's claim of deduction under section 10AA of the Act the Assessing Officer found that such deduction has also been claim in respect of interest income of Rs. 80,16,276. Therefore, he called upon the assessee to explain why the said interest income should not be excluded for computing deduction under section 10AA of the Act. In reply, it was submitted by the assessee that the interest income was earned on fixed deposits placed with Banks against the credit facilities granted and used for the purpose of business of manufacture and export of studded jewellery from the SEZ unit. It was submitted, as per the sanction letter of credit facilities, there is a specific condition that a certain percentage has to be kept as term deposit with the Bank as collateral security. It was submitted, since, the term deposits were placed with the Bank under business compulsion and hav....
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....d deposits with the Banks towards collateral. In this context, she drew our attention to the sanction letter issued by the Bank. The learned Authorised Representative submitted, since, the fixed deposits were kept for the purpose of availing the credit facilities, the interest income earned from such fixed deposits has a direct nexus with the manufacturing and export activities of the assessee which is eligible for deduction under section 10AA of the Act. Drawing an analogy between section 10AA(7) and section 10A(4) of the Act, she submitted that both these sections refer to the profits of business of the undertaking and not to the profits of exports. Thus, she submitted, the aforesaid expression would take within its ambit the entire income of the business of the undertaking including the income which is incidental to the manufacturing and export activity. Therefore, such income will also be eligible for deduction under section 10AA of the Act. In support of such contentions, the learned Authorised Representative relied upon a number of decisions including the Full Bench decision of the Hon'ble Karnataka High Court in CIT v/s Hewlett Packard Global Soft Ltd., [2017] 299 CTR 11....
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....r (Appeals), unfortunately, has totally skirted the issue by restricting his finding to the without prejudice claim of netting-off of interest expenditure against interest income. In our considered opinion, assessee's claim of deduction u/s 10AA of the Act in respect of interest income has to be considered keeping in view not only the provisions contained under section 10AA of the Act read with SEZ Act, 2005 but also in the light of the ratio laid down in the decisions relied upon by the assessee. None of the Departmental Authorities have done that exercise. That being the case, we are inclined to restore the issue to the Assessing Officer for de novo adjudication after due opportunity of being heard to the assessee. It is made clear, while deciding the issue, the Assessing Officer must deal with all the submissions to be made by the assessee with proper reasoning and must also examine the applicability of the ratio laid down in the decisions relied upon or to be relied upon by the assessee. With the aforesaid observations, ground is allowed for statistical purposes. 9. In ground no.2, the assessee has challenged disallowance of deduction under section 10AA of the Act in respect o....
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....esentative submitted, let a direction be given to the Assessing Officer to carry out necessary amendment to the deduction claimed under section 10AA of the Act on realization of the export sale proceeds and accordingly determine the total income. 14. The learned Departmental Representative submitted, the issue may be restored to the Assessing Officer for examining assessee's claim in accordance with law. 15. We have considered rival submissions and perused materials on record. Undisputedly, the amount of Rs. 1,09,35,183, cannot form part of export turnover in terms of Explanation-1(i) of section 10AA of the Act, since, such amount representing export sale proceeds was neither received in nor brought into India during the relevant previous year. However, it has been contended by the assessee that in respect of SEZ unit, there is no time limit prescribed for realization of export value. Thus, the assessee has contended that when such export sale proceeds is realized and brought into India, assessee should be given the benefit of deduction under section 10AA of the Act by carrying out necessary amendment. In this context, it is necessary to observe, unlike sub-section (3) of S....